What’s up with Tesoro’s earnings?

San Antonio-based refiner Tesoro Corp. took a hit to earnings in the third quarter, as it wasn’t able to raise fuel prices at the same time that it had to pay much more for crude oil to make the fuel it sells. Hedging losses also were a factor in the company’s lower income.

The company’s net income fell to $47 million, or 34 cents a share, compared with $274 million, or $1.96 a share, for the quarter that ended Sept. 30.

Tesoro said that refining margins — the difference between what it pays for its feedstock and what its products sell for — were $9.09 per barrel in the quarter, $6.16 below refining margins in the third quarter of last year.

“The industry experienced a significant increase in crude prices in the third quarter, while product prices rose at a much slower rate,” Tesoro CEO Bruce Smith said. “These market fundamentals were the single biggest impact to our quarterly earnings versus last year. The lower margin environment and rapid rise in crude price also negatively impacted other segments of our business, including marketing and our long haul crude hedge program.”

The reduction to refinery margins from Tesoro’s hedging program was $28 million, Smith said.